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Risk and Transactions Cost in Contracting: Results from a Choice-Based Experiment

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  • Hudson Darren

    (Mississippi State University)

  • Lusk Jayson

    (Purdue University)

Abstract

Contracting is a contentious issue in agriculture. Competing theories assert that risk or transactions cost drive contracting decisions, with some argument that autonomy also plays a role. We examine preferences for different contract attributes using a choice-based conjoint experiment. Results of a study of agricultural producers show that both risk and transactions cost play a role in contracting decisions. Autonomy also plays a role, especially to the extent that producers wish to avoid total loss of autonomy. These results suggest that the effects of risk and transactions cost are relative and should both be considered when analyzing contracting decisions.

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Bibliographic Info

Article provided by De Gruyter in its journal Journal of Agricultural & Food Industrial Organization.

Volume (Year): 2 (2004)
Issue (Month): 1 (February)
Pages: 1-19

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Handle: RePEc:bpj:bjafio:v:2:y:2004:i:1:n:2

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Cited by:
  1. Darren Hudson & Karina Gallardo & Terry Hanson, 2005. "Hypothetical (Non)Bias In Choice Experiments: Evidence From Freshwater Prawns," Experimental 0503003, EconWPA.
  2. Vassalos, Michael & Hu, Wuyang & Woods, Timothy A. & Schieffer, Jack & Dillon, Carl R., 2013. "Fresh Vegetable Growers' Risk Perception, Risk Preference and Choice of Marketing Contracts: A Choice Experiment," 2013 Annual Meeting, February 2-5, 2013, Orlando, Florida 142506, Southern Agricultural Economics Association.
  3. Gaetano Martino & Paolo Polinori, 2007. "Contracting Food Safety Strategies in Hybrid Governance Structures," Quaderni del Dipartimento di Economia, Finanza e Statistica 40/2007, Università di Perugia, Dipartimento Economia, Finanza e Statistica.
  4. Erizal Jamal & Yovita Anggita Dewi, 2009. "Technical Efficiency of Land Tenure Contracts in West Java Province, Indonesia," Asian Journal of Agriculture and Development, Southeast Asian Regional Center for Graduate Study and Research in Agriculture, vol. 6(2), pages 21-34, December.
  5. Rabotyagov, Sergey S. & Lin, Sonja, 2013. "Small forest landowner preferences for working forest conservation contract attributes: A case of Washington State, USA," Journal of Forest Economics, Elsevier, vol. 19(3), pages 307-330.
  6. Escobal, Javier A. & Cavero, Denice, 2012. "Transaction Costs, Institutional Arrangements and Inequality Outcomes: Potato Marketing by Small Producers in Rural Peru," World Development, Elsevier, vol. 40(2), pages 329-341.
  7. Gaetano Martino & Paolo Polinori, 2011. "Productive process innovation as sequential adjustment of the hybrid governance structure: the case of the poultry sector," Quaderni del Dipartimento di Economia, Finanza e Statistica 88/2011, Università di Perugia, Dipartimento Economia, Finanza e Statistica.
  8. Kipperberg, Gorm & Bond, Craig A. & Hoag, Dana L., 2008. "An Application of Mixed Logit Estimation in the Analysis of Producers’ Stated Preferences," Working Papers 108719, Colorado State University, Department of Agricultural and Resource Economics.
  9. Banerjee, Swagata (Ban) & Martin, Steven W. & Hudson, Darren, 2006. "A Choice-Based Conjoint Experiment with Genetically Engineered Cotton in the Mississippi Delta," 2006 Annual Meeting, February 5-8, 2006, Orlando, Florida 35389, Southern Agricultural Economics Association.
  10. Alló, Maria & Igleasias, Eva & Loureiro, Maria L., 2013. "Farmers’ preferences and social capital towards agri-environmental schemes for protecting birds," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150620, Agricultural and Applied Economics Association.
  11. Furesi, Roberto & Martino, Gaetano & Pulina, Pietro, 2006. "Contractual Choice and Food Safety Strategy: Some Empirical Findings in Italian Poultry Sector," 99th Seminar, February 8-10, 2006, Bonn, Germany 7715, European Association of Agricultural Economists.
  12. David R Stead, . "Fixed Rent Contracts in English Agriculture, 1750-1850: A Conjecture," Discussion Papers 05/01, Department of Economics, University of York.
  13. Stine Broch & Suzanne Vedel, 2012. "Using Choice Experiments to Investigate the Policy Relevance of Heterogeneity in Farmer Agri-Environmental Contract Preferences," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 51(4), pages 561-581, April.

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